How Credit Default Swaps and massive over-leveraging have CRASHED our economy

[Roland99]

Not some over-zealous homeowners dumping on their mortgages as the right-wing talking heads would have us believe.



Bud Burrell on Financial Sense Newshour
http://www.financialsense.com/Experts/2008/Burrell.html

I highly recommend listening to the ENTIRE interview.

Your jaw *will* drop.



Regular leveraging with banks was about 9:1. In 2004 the SEC rules changed re: leverage ratios. The leverage ratios at the end of 2007 were: Goldman Sachs 26:1, Lehman Brothers 30:1, Merrill Lynch 28:1, Morgan Stanley 33:1 and Bear Stearns 33:1.

Bud Burrell states that Freddie/Fannie hit probably as high as 100:1. Just completely beyond madness.

[willing dwarf]

1. It was a swindle, a con game, and we are left holding the bag.

[AlinPA]

2. The leverage ratio was changed to 40:1 by Chris Cox and the SEC.

[Roland99]

3. For an understanding of how leveraging creates money out of debt, this Google Video >>>>

Money as Debt
http://video.google.com/videoplay?docid=-9050474362583451279

[earth mom]

4. I don't have to listen to that to know it's Wall Street's GODDAMN fault!!!

I listened to a snippet of MSNBC tonight and Brokaw was on there saying something to the effect of "when is the public going to accept some of the blame of this because of overuse of credit?"

WTF?! I was LIVID when I heard that! I am SO sick and tired of those fucking talking heads trying to brainwash everyone!!!

:rant:

p.s. No offense to the OP, I will probably listen to it later when I calm down.

[Roland99]

5. I just finished listening to it and even my very gloomy predictions from 3-4 yrs ago pale....

scary scary shit but, yes, do listen to it all.

[pa28]

6. Excessive leverage.

The only two words that really matter here. Anyone who claims this whole thing was caused by some poor clod in Stockton that had to send jingle mail is being willfully ignorant.

[KoKo]

7. Kick...I'll bookmark to watch video later. thanks...

[endthewar]

8. It doesn't make sense that 5% of homeowners defaulting would lead to a stock market drop of 50%

The Republican explanation doesn't even pass the smell test.

[girl gone mad]

9. I couldn't get through it..

I wanted to, but when he started talking about ACORN, I had to exit. It was like he was trying to get every current RW talking point in.

CRA is not responsible for the subprime mess. Countrywide was the biggest subprime lender, by far, and they were not subject to the CRA since they aren't a bank.

[Roland99]

10. If you can stomach past that, it really is a good interview.

[snot]

11. Is anyone posting this kind of info in freepervilles?

[Incitatus]

13. The ones that want to get banned

[Beaverhausen]

12. K&R to watch later

[truth2power]

14. Obama is on the take? I hope someone can clarify this...

I listened to the entire segment. My understanding of this is limited at best because I'm not an economist, but what I do understand is scary as hell.

They discussed the Community Reinvestment Act and some references to Obama and then Bud said, "One of the candidates is on the take." Seemed to be referencing Obama. I'd appreciate anyone who could explain this better.

Public trials. Yep! Make these criminals bring back the money or spend the rest of their lives in prison.

Comments?

[WhiteTara]

16. give back the money AND spend

the rest of their lives in jail.

[aquart]

15. Are they outlawed YET?

[Roland99]

17. If they'd been regulated and out in the open, perhaps things wouldn't have gotten so bad.

[DemReadingDU]

18. Excellent interview

and I did listen to the whole hour!


:)

[HamdenRice]

19. What a bunch of incoherent right wing crap

I can't believe this is being posted on a progressive forum. Did you actually listen to this nonsense???

Let's see what his explanation is:

-The financial crisis was caused by Sarbannes-Oxley, because it made regulation expensive (you know, Sarbannes-Oxley, the post Enron regulations that forced corporation to report their financial date more honestly and stringently);

-The financial crisis was created by poor people getting mortgages from Fannie Mae because evil Democrats forced them to;

-The poor people got mortgages because of the Community Reinvestment Act (the law that required banks to actually, like, invest in communities);

-Acorn is a corrupt organization that diverted funds from Fannie and Freddie to fraudulently register voters (????);

-It was the fault of regulators because they required accurate financial reporting such as "mark to market";

-Obama is to blame because he was part of Acorn;

-Only McCain was wise enough to see the problem developing;

-It was Clinton's fault;

-credit default swaps, credit defaul swaps, credit default swaps, blah, blah, blah, trillion, trillions, trillions (without seeming to have any clue about what they are or the system risk that they actually do pose -- he did mention dynamic hedging of "credit default swaps, which is the real danger, but didn't seem to know what it was);

-Dear Leader Bush tried to prevent the financial collapse back in 2001, along with McCain;

-Obama is corrupt and paid for by Fannie and Freddie;

-break up the SEC (ie completely destroy fed regulation of securities and exchange markets);

-Obama is "on the take";

-Housing Trust Fund is a slush fund for liberal interests and low income people;

-Ron Paul was the only great presidential candidate this time around.

[Roland99]

20. I sure didn't get anything out of that that Obama is corrupt.

And he mentions ACORN for all of like 5-10 seconds.

And you're going to dismiss everything else because of that?

[HamdenRice]

21. Twice he called Obama corrupt. The rest was right wing, gold bug nonsense

He said the cause of the crisis was Fannie and Freddie and that Obama took more campaign contributions from them than any other Senator. He later said one candidate is bought and paid for, and since he praised McCain several times for having almost prevented the financial crisis, it's obvious which candidate he thinks is bought and paid for.

The rest of the interview shows an astounding lack of understanding of just about everything -- especially the Community Reinvestment Act, Fannie, Freddie, Acorn, derivatives and credit default swaps.

Sorry if it sounded convincing but it was just a lot of incoherent jibberish.

[Roland99]

22. You're exaggerating just a tad. And, btw, Obama has received a lot of donations from

execs of Freddie, Lehman, etc. Look it up at opensecrets.org.